Dinesh Goel of TPI says "Corporations deciding on a sourcing strategy need to answer the “chicken or the egg” question: what comes first - the fix or the move?" "Fix" here means improve efficiency and effectiveness. "Move" refers to outsourcing. He goes on to propose the following framework for making the decison:
  

It would be interesting to place the fix first /move first dilemma in the context of the larger sourcing problem. What to outsource and what to retain in house is a more fundamental problem. You obviously want your own people to work on the more strategic stuff. But what if your strategic stuff is all messed up and you don't have the skills needed to fix it. You might then opt for a Move (bring in a vendor)-Fix (let him change the model and also empower your people)-Move back(take your baby back and manage it with the newly empowered people) model. In this case you would go in for a transformational partner rather than just someone who can just drive efficiencies. I think of it something like sending your kid to a great boarding school.

To cut a long story short, the whole move-fix/fix-move puzzle needs to be viewed in the larger context of what is strategic to your business, whether your people have the skills needed and what type of a partner to engage to transform the areas that need 'fixing'. Once you have this nailed, you can go on to decide whether to fix first or whether to move first.

A salesman's job is to shape needs and generate demand. With the economy in recession, many clients are cutting budgets. Prabhu says there is evidence that budgets are getting halved in several industries. Demand seems to be either stagnant or is taking a nosedive.
     Talking of demand, there have been very different times too. Most people of my generation (read oldies!) have seen the Y2K boom followed by the rollercoaster dot com era - dog food selling websites getting valued at billions and then getting dumped at values lower than even their tiny dog food inventories would command. The dot com era also saw the demand for skills like 'digital strategy'. You could download a few articles on B2B and B2C and take a month rehashing them into a nice looking ppt titled 'Monetizing Eyeballs', replete with clouds and arrows and bill at $250/hr while you are at it. Oh! Did I mention fat perdiems ?
      Most attempts to understand demand are done from a vendor's perspective. Starting with staff aug and ending with consulting. Co-sourcing and managed services bring up the middle. Makes perfect sense. The only problem I have is that this is a very inward way of looking at demand, it's demand from a vendor perspective. The client simply does not think on these lines. From a client's perspective, there are two broad classes of demand a). Steady state demand (SSD)-The keep-the-lights-on part that is responsible for keeping the business running and b). Transformational demand (TD) that seeks to change the business. Steady state demand, while being unglamorous, provides much the needed revenue stability that comes with an annuity business. It allows you to meet your numbers, build operational relationships and acts as a backbone during tough times. Transformational demand has peaks and troughs, is sometimes based on the whim and fancy of client execs. Tapping into transformational demand needs a different style of engagement, centered on thought leadership and the business domain. It demands that you take a point of view when you talk to customers instead of just asking them "I have great people with me. How can I help ? ". What makes transformational demand most critical is that today's TD is tommorrow's SSD. Here are some key differences between the two streams of demand and some thoughts on how to engage.

The term 'shaping demand' is very popular catch all phrase that stands for everything that you need to do to morph demand to align with supply. In blunt terms, if you can sell profitable projects with a high offshore ratio, end to end scope of execution and a favorable resource mix then you have managed to 'shape demand'.

The intent is good, but I feel the focus should be a little different. Projects where the demand is aligned to the supply have a better chance of succeeding, other things remaining the same. However, ultimately it is problems that give rise to needs and needs in turn create demand for services. 

You cannot 'shape demand' unless you help the customer in the demand creation process. The way to do this is by focusing on the problem and helping the customer distill it into needs. Doing this does two things: One> You really, really understand the customer. Not from a vendor viewpoint of service lines and offerings but from a viewpoint of the problem as the customer sees it -with visibility and leverage into all the intangibles that go into the customer's buying decision. The vendor essentially becomes a participant in the decision and is thus in a position to shape the form and structure of the decision and not just the outcome. You don't just win the prize, you get to decide the prize - add any bells and whistles needed, before you win it.

Two> Even if your are less capable that your competition in execution, the customer sees you as a cut above the rest of the vendors who are running around trying to 'sell' their services. You have as much skin in the game as the customer.
You have a far better chance of aligning demand to supply, by not trying to shape demand, but instead, taking a consultative approach to selling that focusses on problems and needs. The demand shaping will take care of itself!

The five year rupee dollar exchange rate clearly seems to trend towards a stronger rupee. Here's the picture from Yahoo.

-Long term contracts with US clients would becoming less attractive and compa nies would start looking at ways to avoid long term bill rate lock in.

-With top managers getting incentivized on margins, internal resource arbitrage would start happening with non US clients being able to command more senior and experienced resources. A rupee spent in servicing non US clients would add more to the bottomline than a US client.-Sales folks would start getting incentivized not just on topline but also bottom line and revenue quality. Not fair eh ? Well, people who sell profitable projects are better than people who sell unprofitable ones. Now, before I open up a pandoras box, let me move on to the next point. 

-Fiscal management would move down to the project level and margin management which is currently a delivery management responsibility would start becoming a project manager responsibility.

-There would be an added incentive to apply the offshoring model to business segments like consulting to squeeze out even better margins. Standalone consulting that cannot be offshored in itself and does not lead to downstream business would be questioned.

Interesting question eh ? Nobody would have any issues in defining a CEO or CFO role. But C.I.O ? Allan Holmes calls for two types of CIO's, strategic and tactical. "Strategic CIO who would focus on creating value through technology, and a tactical CIO whose primary goal would be to run an efficient IT shop." Peter Weill of Sloan MIT says "The CIO’s expertise is in communicating to business colleagues the importance of IT—and more important, getting the governance right." Peter seems to point us to the CIO as a business partner, some one who can tell the business as to what is possible with technology.
              Chaim Yudkowsky provides the following guidelines for a CIO role :
Manage and safeguard key data, communications, hardware and software.
Provide input and feedback in the overall business strategy and budgeting process, not only for IT. 
Help improve process efficiency and reduce cost using technology. 
Be an active part of an executive team with a mission of profitability and productivity.

Most CIOs come from a predominantly IT background and according to CIO Insight : 65% IT, 9% business, 26% hybrid. Jeff Wacker of EDS has an interesting view on what CIO's should not be : Chief Inertia Officer , Chief Impediment Officer, Chief Inefficiency Officer.

I came across this piece in the Times praising US tech companies. The article uses revenue per employee (RPE) as a yard stick and claims "US IT professionals more productive". Basically we have Wipro,Infosys,TCS etc on one side and IBM,Dell, HP etc on the other. The arguments are backed up by numbers but the logic is flawed. I find it hard to believe RPE can be linked to a professional's productivity. The revenue a services company makes is broadly (ignoring systemic factors like currency risk, credit risk etc) dependent on the following :
- Bill rate (significantly higher for 'Western' players)
- Utilization rate (More or less the same)
- Offshore onsite mix (Much better for Indian players).

The higher RPE that US companies make is largely on account of the following:
- Significantly higher bill rate
- Broader portfolio that includes software products and consulting which traditionally have a greater RPE than pure services
- Higher onsite/offshore ratios leading to a higher top line for the same number of FTE's billed.

None of these factors have anything to do with employee productivity. In fact for certain types of engagements staffing more productive employees could reduce RPE! A better caption for the article could have been "US companies turning people capital into cash more productively".

Irving Berger's grand 21'st century challenges inspired me to think about the biggest challenges in offshore software services.

Paradigm shift from service provider to influencer : Being able to influence and drive IT budgetary decisions rather than just respond to RFP's. This would require not just a strong understanding of client businesses but a very high level of trust.

Genuine transnational multi shoring: Being able to leverage local strengths in geographically diverse locations and weaving that into a holistic and a compelling value proposition.


Large deals: Large and complex deals that go beyond the traditional software-BPO mix. Such deals would provide revenue visibility and would stretch current capabilities in execution, mindset and risk management. 

Cultural integration of global workforces: Being able to meet the other challenges above would require the increasingly diverse workforce to be culturally integrated. The culture in offshore firms with purely Indian ethos and values would need to evolve into a more inclusive and global culture.   

Making product outsourcing work: Product development outsourcing has caught on, but is a model in the midst of growth pains. These pains are very different from the ones experienced by the first generation of outsourcers a couple of decades ago. 

Sramana writes about how companies like Salesforce.com are reducing the cost of market entry with a ready made platform and an eager user base. Here's what I believe some of the strategic implications are:

Ecosystems versus monolithic products. Value in monolithic products would get deconstructed by several smaller niche players and re-aggregated into an ecosystem. The crucial enabler would be the existence of a common infrastructural stack that enables re-aggregation.

Market place fragmentation and accelerated consolidation cycles due to increased choices and easier entry. More number of companies would cross the early adopter stage but many would falter when faced with the challenges of mainstream adoption. This would force application vendors to add value or face the consequences of low lock in (see point below).

Lock in 2.0 : Increased switching costs for companies leading to lock in of a different type. Microsoft locked in people with the Windows API. Salesforce is trying to do the same thing with their "on demand" platform. But the catch here is that there is no monopoly as far as the applications that rest on the platform are concerned. They can be switched more easily to a competitor on the same platform because of the commonalities in the underlying tech stack.

Value migration within an app space. Since the infrastructural stack is the same, value will migrate from the back end to more customer facing aspects. Companies whose core competence lies in the backend might find this model unattractive.

New opportunities for product oriented services companies like Symphony Services with reduced selling and marketing costs. Get Salesforce.com as a customer and sell into the app base. You have a common platform to master and the expertise can be leveraged across the whole app community. Software delivery management in such companies would also need to evolve in step with the on-demand, perpetual Beta environment.

Systems integration will become "ecosystem gluing". The task of the integrator will be to provide services to build an ecosystem centered around the chosen SaaS platform.

Changes in the software developer marketplace with skills getting realigned to SaaS platforms versus the current orientation to technologies (J2ee, K2ee , L2ee and what not).

My prediction: Ebay will enter this space soon. The are already doing it in the consumer space with their API program. I see strong market and technology relatedness which will make it an attractive diversification.